Car dealer finance on the rise

Point of sale finance now funds 49 per cent of all new private car sales, compared to 47 per cent in 2007, according to the Finance and Leasing Association.

FLA head of motor finance Paul Harrison said: “FLA statistics show point-of-sale motor finance has remained attractive to customers during current tight credit conditions.

“It has grown in popularity in 2008, as consumers are finding it more difficult to get credit elsewhere. Pos products will prove invaluable for individuals and businesses in the months ahead.”

Peter Cooke, professor of automotive management at the University of Buckingham, agreed, saying dealers could move this source of profit forward by focusing on used as well as new cars.

“Finance adverts at the moment primarily focus on new vehicles,” he said. “But I’ve always looked at it as a supply chain.

“If someone wants to buy a new car, chances are they already have a used car – so they need to realise the equity of that used car to fund the new vehicle.

“Dealers need to be able to ensure their buyers have access to funding, so it’s going to be very important that used vehicles continue to be moved because of that release of equity.”

The FLA’s figures showing an increase in PoS finance reflect a break in a trend, according to a forthcoming report to be published by Cooke and finance provider Black Horse.

Black Horse said the report highlighted a long-term drop in PoS finance sales over the ten years leading up to 2006 and concludes that the sector is currently at a crossroads.

According to Black Horse, from 1996 to 2006, new private car finance fell from 52 per cent of cars sold to 41 per cent.

Used car finance penetration, meanwhile, fell from 53 per cent to 30 per cent by 2006.


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2 Responses to Car dealer finance on the rise

  1. Motor Trader Magazine July 7, 2008 at 7:23 pm #

    Industry analyst offers advice to maximise profit potential

    Car dealers need to adopt a “credit crunch plan” to identify areas in which they can increase profitability, according to Network Automotive.

    The motor industry consultancy said dealers were now paying the price for having ignored many potential profit opportunities during the last few years.

    Managing director Colin Bruder said: “One way of beating the credit crunch is to take a structured approach where dealers look at their business, identify where more profits can be generated, put a plan in action and monitor the results.

    “For most dealers, it is becoming clear they will not ensure future profitability by doing more of what they have done in recent years. They need to find new avenues to maximise their potential.”

    Network Automotive suggested dealers improve their F&I penetration as a means of boosting revenue and the company said selling more service hours could also pay dividends..

    Cleansing databases and increasing average parts invoices were also advised, along with considering a dealer rental business and driving school.

    “This is just a short list and most dealers will have many more ideas,” said Bruder.
    “These are areas most dealers did not consider when the economy was doing better but which could ensure survival in a downturn.”

    Bruder warned, however, that making advances in these areas required a structured approach.

    “It is not enough to just tell staff that they should be doing more,” he said.

    “You need a credit crunch plan with buy-in from all across your dealership where the responsibility for putting the key elements of the plan in place and seeing how well it works is clearly allocated and regularly reviewed.”

  2. Adam Smith July 14, 2008 at 4:52 pm #

    Hmmm…interesting to see it hit almost 50/50. Not too big of surprise I guess given the economy.

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